Western Lithium and Lithium Americas merge

By Laura Syrett
Published: Wednesday, 22 July 2015

The deal between the two companies unites assets in North and South America with a collaboration, which has been on the cards since 2012.

Western Lithium USA Corp. is to merge with fellow TSX-V-listed explorer Lithium Americas Corp., formally combining the companies’ assets in the US and Argentina.

Under the terms of the deal, Western Lithium will acquire all the outstanding shares in Lithium Americas in a transaction that values the company at Canadian dollar (C$) 80m ($64m*), but Lithium Americas’ CEO, John Kanellistas, told IM that the move was a "merger of equals", rather than a buy-out.

"The spirit of the agreement is one of strategically combining our two companies," he said. "We’ve been talking about this deal since 2012 and decided that the time was right to do it now."

The combined entity will control two lithium projects – Western’s Kings Valley deposit in Nevada, US and Lithium Americas’ Cauchari-Olaroz property in Juyjuy, Argentina.

Kanellistas said that the timing of the merger was "perfect", given the two projects’ respective stages of development.

"Cauchari is ready to be developed today," he told IM. "We can start generating revenues in Argentina within two years, whereas Kings Valley is still four years away from going into production."

 WesternKingsValley_WesternLithium
Western Lithium's Kings Valley project is located in Nevada, US. (Source: Western Lithium)
He said that the strategy will be to use cash generated from the operation of Cauchari-Olaroz to help fund the development of Kings Valley.

An NI 43-101 feasibility study on Cauchari-Olaroz reported that the project holds around 2.7m tonnes lithium carbonate equivalent (LCE) at a cut-off grade of 354 parts per million (ppm) Li. Based on this, Lithium Americas contemplates an initial commercial production rate of 20,000 tpa LCE.

Western Lithium’s prefeasibility study for Kings Valley established a proven and probable reserve of 570,000 tonnes LCE at a 0.32% Li cut-off. First stage production at this site is projected at 13,000 tpa LCE, ramping up to 26,000 tpa LCE by the fourth year of operation.

Cauchari-Olaroz is a brine project and Lithium Americas recently signed a heads of agreement with POSCO to use the Korean steel company’s proprietary chemical process to extract lithium at the site.

Western’s King’s Valley project is a hectorite clay deposit and the company has been working with Tenova Bateman Technologies to recover lithium using its LiSX advanced solvent extraction technology.

Kanellistas said that both companies are committed to using lithium production methods that do not rely on solar evaporation ponds, the reliability of which can be adversely affected by weather conditions.

An analyst commenting on the deal told IM that the merger presented a number of positives
for both sides. "[The deal with Lithium Americas provides Western with] medium-term cash flow from the permitted Cauchari property, with a greater ability to finance it over the next 12 months," the analyst, who preferred not to be named, said.

They added that the new company will have the benefit of a better balance sheet and deeper cash reserves as it progresses its negotiations with POSCO, plus geographical and product diversification.

In a joint statement, the companies indicated that they would be targeting the lithium battery industry, which is "seeking near-term production supply and a long-term stable supply chain that assures volume, quality and price".

*Conversion made June 2015